IPhone manufacturer was spending freely to all stages of the production process, giving you the advantage to the larger operation.

Turn the impossible into possible

IPhone manufacturer was spending freely to all stages of the production process, giving you the advantage to the larger operation.

About five years ago, Jony Ive - designer of the famous Apple decided that he wanted a new feature next-generation MacBook: a light green dot on the small screen, lighting by aluminum the computer to indicate when the camera is turned on. What is the problem? That's according to natural laws, the light can not penetrate metal.

A former employee aware of the development, requested anonymity to avoid the hassle that Ive had convened an expert group materials and production to find out how to turn the impossible into possible. The group found they could use a laser as needed to aluminum through the holes small enough to be almost invisible to the human eye but large enough to light through.

Apply the solution bulk is another matter. Apple to laser devices and need a lot. The team of experts to find a U.S. company specialized in producing laser equipment for manufacturing chips which, after some tweaking, can do that. Each machine typically costs about $ 250,000. Apple has to convince the seller to sign an exclusive contract and since then has purchased hundreds of their products to make the holes for the green light is shone on products such as MacBook Airs, trackpads and wireless keyboard.

An Apple store

Maybe most of Apple's customers never noticed much green light, but the form it says huge competitive advantage for Apple: The process operation. This is the world's production, purchasing and logistics in the new CEO Tim Cook, extremely brilliant, has gained the confidence of Steve Jobs.

According to a dozen interviews with former employees, the executives at suppliers and other management experts familiar with the operations of the company, Apple has built a closed ecosystem in which Apple control applied to almost every part of the supply chain from design to retail stores.

Due to massive - and works around the clock, Apple has been a big discount with most of the components, with production capacity and air freight. Mike Fawkes, a former supply chain director at Hewlett-Packard and now investors VantagePoint Venture Partners Capital said: "The mastery of the operation is a great asset to Apple as well as product innovation or marketing. They perform excellent activity to levels not seen before. "

Spending freely = Profit

The advantage of this operation is the process which allows Apple to control the introduction of mass products without having to maintain large inventories and erode profits. According to estimates by analyst Gene Munster of Piper Jaffray, which allows Apple, which is often criticized by the high price, selling iPad products at prices that few competitors can beat while earn 25% profit on each product.

And if the latest rumors are reliable, the information through the process of this activity is probably part of what gives Apple the confidence to step into the popular TV market in 2013 with severe TV product suite can be closely associated with the current Apple software like iTunes. The cynicism popular with Apple's ability to compete in a market where prices are very sensitive to where the profit is usually a digit is "exactly what people said when Apple engaged in mobile market , "Munster said.

Apple began renovation on the substantive details of the supply chain management almost immediately after Steve Jobs returned in 1997. At that time, most computer manufacturers shipping products by sea, a choice lot cheaper than air transport. According to John Martin, director of logistics, who has worked with Jobs to arrange flights, Jobs paid 50 million dollars to buy all of the freight space on vacant vacation to ensure that the product new pale blue IMACS widely available next year on Christmas. The move is detrimental to other competitors, such as Compaq, later to bookings by air transport.

Similarly, the decrease in revenues in 2001 of the iPod, Apple found that the company can put a lot of small players on the flight so that transport them directly from the factory in China until consumers become very economical. Remember Fawkes as an employee of HP purchase order and received it a few days later, tracking its journey through the world of the Apple website, which is an amazing moment he uttered only up from, "Oh."

The advantage of this operation is the process which allows Apple to control the introduction of mass products without having to maintain large inventories and erode profits.

Psychology - the spending freely wherever necessary and reap profits from the larger mass in the long run - be institutionalized throughout supply chain and started Apple in the design phase. Ive and his engineers sometimes spent months living on the outside to be able to reach close to suppliers and manufacturers to help refine the process of transfer of industrial design into devices are mass produced.

With the new design such as a block of the MacBook casing is cut from a piece of aluminum, Apple's designers had to work with suppliers to create new instruments and equipment. The decision to focus on a few product lines and making the request is a big advantage. Matthew Davis, an analyst with Gartner's supply chain, has ranked Apple as a supply chain world's best in four years, said: "They have a very consistent strategy and any parts of the business are linked to their strategy around that. "

When it's time to step into production, Apple uses a larger weapon: more than 80 billion in cash and investments.The company said it plans to double the cost of capital on supply chain next year to 7.1 billion, while pledged another $ 2.4 billion in advance payments to key suppliers. This strategy ensures the availability and lower prices for Apple - and sometimes limited choices for others.

As a former manager at HTC, said before the announcement of iPhone 4 in June 2010, the competitors like HTC can not buy multiple screens as they need because manufacturers are busy completing Apple's orders. Under the production management company drill, to produce iPad 2, Apple also quickly so many high-end drill to produce the external casing for the device in time when other companies to take from six weeks to six months.

As a supplier to Apple is very attractive because of large amounts of hard work but also because of strings attached. When Apple asked quotations for components such as touch screen, it requires detailed calculations how to get the rate that includes cost estimates for materials and labor and benefit plans the. Apple requires a lot of key suppliers to keep inventory within two weeks at a mile with Apple's assembly plants in Asia and sometimes not paid within 90 days after using a flexible event, according to an executive, consultant for Apple and requested anonymity for fear of damaging the relationship.

However, not all suppliers are concessions. One executive working with the manufacturers of said components of Apple's bargaining tactics tend to reduce price pressures led to lower profits.

After months of negotiations, the company declined to $ 1 billion in funds from Apple to require vendors committed most of their production capacity to cater for the products of Cupertino. The director knew the negotiations requested anonymity because the discussions are not publicly said that although the deal provides $ 1 billion of cash in front, the company did not want the extra on Apple - and Apple does not want to help reduce prices.

Apple's control peaked in preparing for one of these published his famous product, a process that is arranged to be drawn tight over the years of the first publication of the Mac products , iPod, iPhone and iPad. For weeks before the announcement, the factory worked overtime to hundreds of thousands of construction equipment. To monitor performance and ensure confidential prior to the announcement, Apple put the electronic screen in a box of parts that allows observers to monitor everything in Cupertino at the factory in China , an attempt to prevent leakage.

As a consultant working for Apple, at least the company was shipping products in the tomato containers to avoid detection. When iPad 2 was announced, the finished device is packaged in the sealed container and the Apple staff control each delivery point - docks, airports, warehouses and loading docks and vehicle distribution centers - to make sure that each product is preserved.

The Apple retail store offers the advantage last operation for the company. Once the product is sold, the company can track the shop and demand and adjust hourly forecast daily production. If a certain component of all, the team is deployed and are approved to spend millions of dollars for more equipment to avoid production delays.

Apple's massive profit - Gross profit was 40% last quarter, compared with 10-20% of most other hardware companies - largely due to the focus on activities. This will certainly remain a priority under Cook. The new CEO is known to have given his colleagues a Competing Against Time (roughly translated Compete with time), a book on the use of the supply chain as a strategic weapon in the business. According to Martin, director for logistics, Cook used a famous phrase to emphasize the need for effective, "No one wants to damage the milk."

Plan to double the spending of up to 7.1 billion dollars in Apple's supply chain continues to focus on streamlining the organization to achieve greater efficiency and production control.